Jeff Goldsmith
The saga of forty years ends end
After closing the market on Wednesday, April 16, the Unitedhealth group reported its first quarter of 2025 earnings. Unh missed their expected profits by 1Q by 9 cents per share, but the company also reduced profit estimates throughout 2025 by 12%. On Thursday, opening investors reacted with uncontrollable fury and at a number of hours undressed Unh over 100 billion market capitalization. During the splendor in retrospect, UNH was valued at perfection at the price indicator summarizing the pre -setting of 38, six points higher than Amazon and eight points higher than Microsoft, which may explain the wildness of correction.
The final answers to the query – what happens to the extensive mass of United firms – is not possible because the company is a black box price $ 400 billion. Main United Companies – medical insurance, care provision, pharmaceutical advantages management and intelligence/business services – are related to one another that only CFO United John Rex and several other other older managers actually know from where United earnings actually flow. Below are speculation about the primary causes of United profits.
First of all, the principal driver of the last twenty years of the increase in United profits used a big a part of the amazing monthly money flows (which were approaching $ 3 billion a month), buying other firms. This event may end. United historically spent about half of his accrued wealth on dividends and the purchase of shares, that is, paying shareholders for the remaining shareholders.
However, large and undisclosed contributes to the increase in Unh earnings acquisitionswhich have been in almost an uninterrupted string for forty years. In the years 2019–2023 United spent an incredible $ 118 billion on the purchase of other firms, of which just about all ended in Optum. Thanks to the great discipline of the executive chairman, Unh Stephen Hemsley and President CFO, John Rex, United almost invariably bought profitable firms in transactions that were dropped at earn.
It seems that United has lacked accretion transactions. With the lack of major recent transactions, horde of money and short -term United investments price $ 81 billion (larger than Exxon Mobil) will probably increase much more. This will make people wonder why United raises the rates to employers or shake suppliers for deeper discounts after they sit on the growing mountain of money.
United cannot buy more health insurers (each Shabign and Humana have been on the market for years) because the federal organs will stop antitrust. There aren’t any more accretic offers of a gaggle of doctors. Hospitals currently employ over a 3rd of practicing doctors In the USA (very unhappy state affairs for either side). But these hospital acquisitions limited the universe of accessible doctors’ transactions for United.
United’s passing After acquiring bankruptcy, Steward Healthcare’s Physician Group (Management) showed us that they’re in the field of buying groups belonging to the hospital, most of which lose their buckets of cash. Unh also disappeared from medical groups belonging to investors, corresponding to Envision or Team Health, i.e. Vampire-Iise, hospitals. Ftc/justice raised Red flag About the purchase of UNH home health firms after their two multi -billion transactions during the Pandemia and LHC and Amedisys group.
When Optumhealth was 1 / 4 of its current size, just seven years ago, it was a ten% margin. Since then, Optumhealth margins have dropped by over 25%. Because the reduction of costs and multiple changes in leadership, the Corporate Corporate Culture Optumhealth expect a wave of resignation and trade union activities passing through groups of OH doctors, which further harm the general margins of Optum Health and UNH.
Optminsight- United Business Intelligence and Corporate Services- was almost 28% margin before the fast and reckless takeover of Equian, Change and Navhealth during the pandemic. Now it is a 16.5%marginal business. Optminsight and United were seriously damaged by February 2024 Change the hack of healthcare.
The change that processed the stunning USD 1.5 trillion, i.e. a 3rd of all American medical claims, lost many offended clients after they found that the change was actually a mass of poorly shot couple and barely integrated implementations whose security failures damaged money flow and operating costs of their very own firms. UNH could be silly to purchase more data firms, because the section of the change turned out to be clear that they may not start them safely.
Thus, two largest UNH firms, medical insurance and health services, which in the last five years of the operational margin can’t be saved by more accretes transactions. United stays steadfast selfless in possession of hospitals. Rather, Unh tried to surround and cannibalize hospitals.
Secondly, the kindness of the strangers went. One of the strategic challenges related to the development of Optumhealth was that when United bought large groups of risk bearing doctors, corresponding to healthcare partners, Atrius and Kelsey Seybold, he also bought profitable risk agreements with the competitors of United medical insurance firms. Almost 23 billion dollars of Optumhealth revenues (Over one fifth) and possibly a better percentage of its profits comes from large Medicare Advantage contracts with corresponding to Blue Shield of California, Blue Cross Blue Shield of Massachusetts etc.
Since Pandemic, Optumhealth has the same costs as all these hospitals – nursing champagne and expenses of doctors from rotary and temporary agencies, delivery costs, etc. It is likely that a lot of their “partners” finally said “Nyet” to conclude contracts that may allow Optumhealth to get well these costs.
Optumhealtion may not terminate contracts with competing health insurers without increasing bad publicity and possibly causing anti -diring queries. So UNH has serious problems using negotiations with competitors. Almost actually inappropriate indicators of the renewal of the Medicare Advantage agreement for their very own medical groups reduce the margins of Optumhealth. It is unlikely that competing health plans make the maintenance of the United/Optum margin is a priority.
And like the remainder of the industry, United is waiting for an extra reduction in the registration of MEDICID managed care and almost certain reduction of payment from the recent administration. The prospects of earnings for Optum as an entire are gloomy. Long -term deterioration of Optum margins, which fell from 8.1% in 2018 to six.1% in 1q25, caused real damage in the general earnings of United. The increase in Optum was the principal factor contributing to the unusual increase in United profits. This unique series of growth is probably over.
Thirdly, the cold heart strategy consisting in distant care through AI powered algorithms reached some extent of decreasing phrases. After The terrifying murder of Brian Thompson and brutal is exposed Status and Wall Street Journal On enthusiastic contradictions of Unh and coding practices, some analysts speculated that UNH could withdraw a refusal machine that bore their margin by blinking patients and doctors from payment for medical services, including services covered by regular Medicare.
Liming this speculation, UNH medical insurance margin has actually increased In 1 sq. 25 to six.1% vs. 5.2% for all 2024. However, the claims of the refusal of guardians kill UNH politically. They will lead on to far more canceled contracts by suppliers, lawsuits and further average assessments of consumer satisfaction. United has Minus 12 Net Promoter Scoresuggesting that UNH doesn’t impress tens of tens of millions of shoppers.
We should expect Sir Andrew Witta to stop pretending to be the general director of UNH and can return to England to cultivate his herd and fly with fish. It was Sorry and never conducive to performance. A 25% lack of market capitalization after calling for profits Q1 damaged the president’s probability of President/CFO John Rex for fulfillment. The good and lonely president of United, Stephen Hemsley, who did an unusual job, developing this company since he replaced Bill McGuire in 2006, has a devil of the challenge of succession.
It seems that the best history of development in the history of the American corporate health enterprise is coming to an end. I actually have been a shareholder of this extraordinary company over and over, but I’m not lost faith in this ambitious managed care project. When we wait Medicaid Blood Letting It is difficult to acknowledge the reason for investing in a united health group from Trump 47 and the unlucky of the Republican Congress. In fact, united from a huge pile of acquired healthcare resources in real business may prove to be an not possible management challenge.
Jeff Goldsmith is a Veteran Futurist of Health Care, the President of the Health of Futures Inc and the unusual associate of THCB. It comes along with his Personal Suback
